Week 1

1. Week 1 FM10211 – Retail Operations Chapter 1: Retailing Formats and Structures Various ways to classify businesses

2. Let’s see your schedules!

3. Why are you here? What do you want to do?

4. Industrial Classification • What does the business do? • SIC • Standard Industrial Classification • Old System • NAICS • North American Industry Classification System • As of 2002 • Why use codes? • Classifies businesses in standard categories • Words can be vague • One business may fall into multiple categories FM10211 - Retail Operations

5. Why Classify? • Identify businesses independent of current business lingo • Business Census taken every 5 years • Data can be used for a variety of purposes: • zapdata.com – prospect lists, mailing lists • infousa.com – mailing lists FM10211 - Retail Operations

6. Types of Ownership • Who owns the business? • Several business structures to choose from • Each has benefits and drawbacks FM10211 - Retail Operations

7. Types of Ownership:Sole Proprietorship • A company owned by one person • Benefits • Simple! • Fully controlled by the owner • Taxed once • Drawbacks • Full personal liability FM10211 - Retail Operations

8. Types of Ownership: Partnership • A company owned by two or more persons, each with a financial interest • Benefits • Simpler than a corporation • Shared workload • Taxed once • Drawbacks • Shared decisions • Can be personally liable, depending on type FM10211 - Retail Operations

9. Types of Ownership: Corporation • A company that exists as an independent entity • Owned by shareholders • Benefits • No personal liability • Easier to raise money through sale of stock • Drawbacks • More complicated • Double Taxation (depending on type) FM10211 - Retail Operations

10. Types of Stores • Who owns the store? • Are there others? FM10211 - Retail Operations

11. Types of Stores: Independent • A single unit owned by an individual, small group, or family • 1.5 million in operation today • Trend is away from independent stores • Very hard to survive • 1/3 of all new retailers fail within the first year • Largest Independent Department Stores? • Nordstrom • Dillard’s • Other examples? FM10211 - Retail Operations

12. Types of Stores: Chain • Multiple retail units owned by one company • Can be as few as two, usually many more • Usually has centralized buying and management • Examples? FM10211 - Retail Operations

13. Types of Stores: Franchise • Contractual arrangement between a franchiser (the licensor) and a franchisee (the individual owner) • Company may own some, but not all, stores • License can include: • Name • Operating Procedures • Buying rights • Etc. • Examples? FM10211 - Retail Operations

14. Types of Retailers • Wide variety, offering various types of • Merchandise • Service level • Price level FM10211 - Retail Operations

15. Stored Retailers • Has a physical location • Classifications have changed over time FM10211 - Retail Operations

16. Department Stores • Extensive assortment • Organized by department • U.S. Bureau of Census definition: • At least 25 employees • At least $10 million in sales • Carries: • Dry goods and household items • Family apparel • Furniture • Home furnishings • What about Nordstrom, Saks, etc? • Criteria has been relaxed FM10211 - Retail Operations

17. Specialty Stores • Limited type and/or assortment • Specialized service • Examples • Gap • Home Depot • Best Buy FM10211 - Retail Operations

18. Other Stored Retailers - I • Boutiques • Small specialty stores • Often owned or franchised by designer • Variety stores • Wide assortment • Mom and Pop stores • Small • Privately owned • Discount stores • Lower Prices • Lower operating costs – why? FM10211 - Retail Operations

19. Other Stored Retailers - II • Mass merchandisers • Large discount stores • Off-price stores • Sell brand-name merchandise lower than department stores, due to low overhead and overruns • Catalog showrooms • Samples on floor • Order from catalog • Filled from warehouse FM10211 - Retail Operations

20. Other Stored Retailers - III • Warehouse stores • Discounters • No-frills setting – no credit cards? • Often make special purchases of brands • Sometimes have membership fee • Factory outlets • Manufacturer-owned (traditionally) • Closeouts, overruns, discontinued items FM10211 - Retail Operations

21. Non-stored Retailers – I • Catalog/Mail order • Independent or an extension of a store’s business • Can be highly specialized • Serves specific customers • not necessarily within one geographical area • Direct marketing • Mailed catalogs • Flyers • Radio • Telemarketing • TV Home Shopping FM10211 - Retail Operations

22. Non-stored Retailers – II • Home parties • Opening your home to guests • Tupperware parties • Pickle parties • Kiosks • Small stationary facilities • Order through a computer • Temporary retailers • Small vendors who set up carts • More recently short-term rentals • Halloween stores FM10211 - Retail Operations

23. Non-stored Retailers – III • Door-to-door selling • Personal contact with the consumer at home or office • Avon, Avon Mark • Mary Kay FM10211 - Retail Operations

24. Malls and Shopping Centers • Large Malls • Anchor store • One or more large retailers • Usually located at the ends of the mall • Traditionally department stores, but no longer a rule • Specialty stores • King of Prussia Mall • 8 Anchors! • Over 400 Specialties! • Why malls? FM10211 - Retail Operations

25. Other Malls • Factory outlet malls • No longer attached to factories • Can include clearance centers • Where are they located? • Strip malls (shopping centers) • May have supermarket or other type of anchor • Attracting larger retailers FM10211 - Retail Operations

26. International Retailing • Going global: opening stores international • Increase their business • Overseas investors buying parts of American companies • Examples • Gap • Benetton FM10211 - Retail Operations

27. Mergers and Integration • Combines businesses • Sustain or enhance growth • Create competitive advantage • Diversify • Share overhead FM10211 - Retail Operations

28. Acquiring a company or developing a function above or below in the supply chain Examples The Limited acquired Mast Industries, which manufactured the company’s apparel Designer Boutiques Why? The Marketing Chain Fibers Yarn Fabric Garment/Final Product Design and Marketing Retail Vertical integration FM10211 - Retail Operations

29. Buying or forming a company on the same level of the marketing chain The Limited owns: Victoria’s Secret Express Bath & Body Works The White Barn Candle Co. Aura Science Henri Bendel Why? The Marketing Chain Fibers Yarn Fabric Garment/Final Product Design and Marketing Retail Horizontal integration FM10211 - Retail Operations

30. Private-Label Merchandising • Retailers have products made for them to sell exclusively • A form of vertical integration • Eliminates the buying level • Examples • The Limited • Gap FM10211 - Retail Operations

31. Instructor • Instructor: Max Minkoff • Teaching style: Interactive! • To contact me: max@planetminkoff.com • Other availability: Immediately after class • Website: www.planetminkoff.com/AIPh/RetailOps/ FM10211 - Retail Operations

32. Course Content • Teaching Strategies • Interactive Class Discussion • PowerPoint w/printed notes • Textbook: • Retail and Merchandise Management, Rabolt and Miler • Technology Needed: • Word Processing • PowerPoint FM10211 - Retail Operations

33. Evaluation • 40%: Class Participation • including attendance • 15%: Midterm Exam • 15%: Final Exam • 20%: Project • 10%: Case Presentation FM10211 - Retail Operations

34. Attendance Policy • Two absences = one full grade drop • A third absence = an additional grade drop • Four absences = Failure • NOTE: • There are NO excused absences. • Lates and/or early departures add up! I WILL FAIL YOU IF I HAVE TO! FM10211 - Retail Operations

35. How to do well in this class • I’m not here to test your memory! • Come to class • Don’t be late – they add up! • Participate • We all know about retail • Think about retail • Why have companies decided to do what they do? FM10211 - Retail Operations

36. Case Presentations • Every student must present a case at some point during the quarter • Sign up be end of class week 2 • Cases are first come, first served • No more than 5 cases per week! • Presentation should be about 5 minutes • 5-8 slides • Follow with Major Question and 2+ Study Questions • Presentations cannot be made up! FM10211 - Retail Operations

37. Design Guidelines • Use a pre-established design schemes • In the form of a grid. • All type should be at least 20-24pt • Use standard type fonts • Helvetica, Times, and Arial • Use a low-key design template, or none at all • Maintain a consistent theme. • Use minimal or no animation. • Don't use sound effects. FM10211 - Retail Operations

38. More Design Guidelines • Your presentation is a visual aid. • Support what you say, not duplicate it. • Provide talking points, not a script. • Do not read from the screen! • Unless a quote, each point should fit on one line • If it doesn't, it's probably too long. • Do not talk "to" the screen FM10211 - Retail Operations

39. Example: Case 7: The Limited • Created in 1963 by Leslie Wexner • Borrowed $5,000 from his aunt • Now a billionaire • 2,400 Limited Stores • 7 different market segments • Huge increases in sales and profit • By-passed traditional production system • Created global manuf. & distrib. Network FM10211 - Retail Operations

40. The Limited’s Strengths • Specialty Fashion chains - newest trend • Unrelenting acquisition strategy • In touch with trends - example: • President was in Italy in 1983 • Saw teens buying bulky yachting sweaters • Knocked off sweaters, sold millions FM10211 - Retail Operations

41. Limited Merchandise Meeting • Spring offensive: safari clothing • Established by Banana Republic • Basis for new line • Banana Republic safari jacket • Flower print shirt from Laura Ashley • Tan cotton pants from Europe • Other elements to be added • New line named Outback Limited FM10211 - Retail Operations

42. Market Test • Late November: • Samples sent to handful of Southern stores • Results monitored daily • Final results after Thanksgiving weekend • It’s a hit! • Certain adjustments necessary FM10211 - Retail Operations

43. The Plan • 500,000 garments in stores w/in 10 weeks • Can’t patent - must establish first! • Most retailers must deal with middlemen • Could take 10 months! • Limited had bought Mast Industries in ‘78 • Knows how to get things done in Far East • Track down fabric • Get products through customs • Etc. FM10211 - Retail Operations

44. Delivery: Late January • On jets to New York and California • Then trucked to Columbus Distribution Center • Wexner wants airfield in Columbus OK’d • Would cut trip from 6 days to 3 • Efficient, computerized sorting and packing • Price tagged • Sorted • Packed • Out the door in 48 hours • Most retailers could take weeks! FM10211 - Retail Operations

45. In Stores • Centralized visual merchandising • Every two weeks • No deviation allowed • “We don’t want 100 managers out there deciding what the stores should look like” - Limited President • Industry analysts report no markdowns • Suggests line is successful • “The could be a $500 million line” • Would be 4th largest U.S. women’s sportswear brand FM10211 - Retail Operations

46. Major Question: • How Does The Limited get its product to the consumer faster than conventional manufacturer selling to retailers? FM10211 - Retail Operations

47. Question 2 • Discuss how operations of The Limited (a chain) are different from department stores and small independent stores in terms of product acquisition. FM10211 - Retail Operations

48. Question 4 & 5 • Why would Verna Gibson (president of The Limited division) want to check the potential for sales appeal for the Outback Red line before she commits to production? • Why would The Limited test market the new Outback Red line in November in Southern cities? FM10211 - Retail Operations